OPEC Deepens Oil Cuts as U.S. Shale Comes Back

By Brian WingfieldBrian Wingfield and Samuel DodgeSamuel Dodge

The most globalized effort to cut oil production in history is proving increasingly successful. Now Iraq and Kazakhstan just need to do their bit. OPEC curbed output as promised in May, even though Iraq, the group’s second largest producer, hasn’t complied with the agreement this year. Non-OPEC nations trimming supplies are making steady gains, without help from Kazakhstan. There’s still time to improve: the cuts are set to remain in place through March.

OPEC Cuts Output More Than Promised

Thousands of barrels a day

Production-cut target reached

Production did not reach target

OPEC nations

Target 1,164

106%

May

1,237

105%

Apr.

1,223

109%

Mar.

1,264

97%

Feb.

1,125

99%

Jan.

1,153

Non-OPEC nations

Target 558

86%

481

May

72%

403

Apr.

53%

298

Mar.

40%

223

Feb.

52%

289

Jan.

Production-cut target reached

Production did not reach target

OPEC nations

Target 1,164

106%

May

1,237

105%

Apr.

1,223

109%

Mar.

1,264

97%

Feb.

1,125

99%

Jan.

1,153

Non-OPEC nations

Target 558

86%

481

May

72%

403

Apr.

53%

298

Mar.

40%

223

Feb.

52%

289

Jan.

Production-cut target reached

Production did not reach target

OPEC nations

Target 1,164

106%

May

1,237

105%

Apr.

1,223

109%

Mar.

1,264

97%

Feb.

1,125

99%

Jan.

1,153

Non-OPEC nations

Target 558

86%

481

May

72%

403

Apr.

53%

298

Mar.

40%

223

Feb.

52%

289

Jan.

Production-cut target reached

Production did not reach target

OPEC nations

Target 1,164

May

1,237

Apr.

1,223

Mar.

1,264

Feb.

1,125

Jan.

1,153

Non-OPEC

Target 558

481

May

403

Apr.

298

Mar.

223

Feb.

289

Jan.

Sources: Bloomberg, OPEC secondary-source estimates, IEA preliminary estimates. Includes revised data

The 21 nations participating in supply cuts are collectively trying to reduce output by almost 1.8 million barrels a day, in most cases using October levels as the starting point. Five OPEC members and three from outside the group met their targets last month, versus nine in April, revised data show. The biggest producers wield the most influence. Russia’s deeper cuts buoyed non-OPEC compliance, even if it didn’t fully meet its own pledged supply curbs.

Which Countries Reached Their Output Target in May?

Eight of 21 countries involved reached their target

Production reached target

Production did not reach target

Non-OPEC nation

Russia

Kazakhstan

Azerbaijan

Iraq

Kuwait

Bahrain

Algeria

Saudi

Arabia

Qatar

U.A.E.

Mexico

Sudan

Oman

Brunei

Venezuela

South

Sudan

 

Ecuador

Equatorial Guinea

Malaysia

Gabon

Angola

Production reached target

Production did not reach target

Non-OPEC nation

South America

Mexico

Venezuela

Ecuador

EMEA

Russia

Kazakhstan

Azerbaijan

Kuwait

Iraq

Bahrain

Algeria

Qatar

Saudi

Arabia

U.A.E.

Sudan

Oman

Equatorial

Guinea

South Sudan

 

Gabon

Angola

Asia

Russia

Kazakhstan

Brunei

Malaysia

Production reached target

Production did not reach target

Non-OPEC nation

Russia

Kazakhstan

Azerbaijan

Iraq

Kuwait

Bahrain

Algeria

Saudi

Arabia

Qatar

U.A.E.

Brunei

Sudan

Oman

Venezuela

Mexico

Equatorial Guinea

South

Sudan

 

Ecuador

Malaysia

Gabon

Angola

Production reached target

Production did not reach target

Non-OPEC nation

Russia

Kazakhstan

Azerbaijan

Iraq

Kuwait

Bahrain

Algeria

Saudi

Arabia

Qatar

U.A.E.

Brunei

Sudan

Oman

Venezuela

Mexico

Equatorial Guinea

South

Sudan

 

Ecuador

Malaysia

Gabon

Angola

Note: OPEC members Iran, Libya and Nigeria are allowed to boost output

More than half of the burden for reaching the total supply-cut goal falls upon Saudi Arabia, Russia and Iraq. Only the Saudis have consistently met their target, lifting OPEC’s compliance in the process. Russia, responsible for much of the non-OPEC pledged cuts, has said it would curb output gradually. Iraq’s compliance rate in May fell to 65 percent, versus 87 percent in April, OPEC secondary source data show.

May Crude Oil Production

Thousands of barrels a day

Production reached target

Production did not reach target

Non-OPEC nation

1,727

Kazakhstan

632

Malaysia

2,885

U.A.E.

10,948

Russia

615

Qatar

1,613

Angola

2,705

Kuwait

9,940

Saudi Arabia

4,424

Iraq

528

Ecuador

1,059

Algeria

1,980

Mexico

204

Gabon

969

Oman

191

Bahrain

1,963

Venezuela

177

Eq. Guinea

794

Azerbaijan

110

Brunei

105

S. Sudan

74 Sudan

Production reached target

Production did not reach target

Non-OPEC nation

10,948

Russia

9,940

Saudi Arabia

4,424

Iraq

2,885

U.A.E.

2,705

Kuwait

1,980

Mexico

1,963

Venezuela

1,727

Kazakhstan

1,613

Angola

1,059

Algeria

969

Oman

794

Aze.

632

Mal.

615

Qatar

528

Ecuador

204

Gabon

191

Bahrain

177

Eq. Guinea

110

Brunei

105

S. Sudan

74

Sudan

Production reached target

Production did not reach target

Non-OPEC nation

10,948

Russia

9,940

Saudi Arabia

4,424

Iraq

1,963

Venezuela

1,980

Mexico

2,705

Kuwait

2,885

U.A.E.

1,727

Kazakhstan

969

Oman

794

Azerbaijan

1,613

Angola

1,059

Algeria

632

Malaysia

615

Qatar

528

Ecuador

204

Gabon

177

Eq. Guinea

191

Bahrain

110

Brunei

105

S. Sudan

74

Sudan

Production reached target

Production did not reach target

Non-OPEC nation

10,948

Russia

9,940

Saudi Arabia

4,424

Iraq

1,963

Venezuela

1,980

Mexico

2,705

Kuwait

2,885

U.A.E.

1,727

Kazakhstan

1,613

Angola

1,059

Algeria

969

Oman

794

Azerbaijan

632

Malaysia

615

Qatar

528

Ecuador

204

Gabon

177

Eq. Guinea

191

Bahrain

110

Brunei

105

S. Sudan

74

Sudan

Sources: Bloomberg, OPEC secondary-source estimates, IEA preliminary estimates

A glance at production targets versus output shows how close many nations are to achieving their pledged supply-cut goals. In May, Oman, Russia and the U.A.E. nearly delivered in full. OPEC members on the whole had a 106 percent compliance rate, according to Bloomberg calculations. Non-OPEC producers’ adherence to crude oil cuts was at 86 percent, preliminary data from the International Energy Agency show.

By How Much Did Countries Reduce Crude Production?

Thousands of barrels a day

Non-OPEC

Non-OPEC

Sources: OPEC secondary-source estimates, IEA preliminary estimates

Kazakhstan, which is boosting output from its Kashagan oil field, again produced more crude than it pledged to do under the supply agreement. Small producers Gabon and South Sudan also pumped more than they said they would, according to OPEC and IEA data. Other nations that didn’t cut as much as promised include Algeria and Malaysia. OPEC members Libya and Nigeria are exempt from supply curbs, and Iran is allowed to boost output.

Price and Production

Prices Have Fallen to Near November Levels

Brent crude oil price as of June 15, 2017

Total OPEC production (thousands of barrels a day)

32,210

$80.12

$46.92

29,045

2010

2011

2012

2013

2014

2015

2016

2017

Brent crude oil price as of June 15, 2017

Total OPEC production

(thousands of barrels a day)

32,210

$80.12

$46.92

29,045

‘11

‘12

‘13

‘14

‘15

‘16

‘17

2010

Brent crude oil price as of June 15, 2017

Total OPEC production (thousands of barrels a day)

32,210

$80.12

$46.92

29,045

2010

2010

2011

2012

2013

2014

2015

2016

2017

Brent crude oil price as of June 15, 2017

Total OPEC production (thousands of barrels a day)

32,210

$80.12

$46.92

29,045

2010

2010

2011

2012

2013

2014

2015

2016

2017

Sources: Bloomberg, ICE Futures Europe

By the end of May, oil prices had fallen to within cents of where they were on Nov. 30, when OPEC announced the supply cuts. That’s largely because others, notably U.S. shale producers, have ramped up output. Libya and Nigeria have also boosted production, and the IEA sees new supplies from OPEC’s rivals outpacing global demand growth next year. For OPEC and its allies, draining the world’s oil glut suddenly looks much harder.